Digital Marketing And The Music Industry: Record Labels Should Be Media First Companies (And How They Can Do It)

Every record label should be a media first company.

It’s no secret that the music industry has gone through a vast change in the past decade. With revenue shifting from physical products to streaming, marketers whose job it was to sell CDs are now responsible for digital marketing. With the rise of social, the industry is in the process of adapting, but even with the $1.7 billion spent on marketing, best practices to help artists engage with fans while driving a measurable return on investment have yet to emerge.

The answer to social is in building a media company through the acquisition of social properties, a stake in consumer attention. By investing in creating a sustainable funnel rather than scraping together one-off marketing campaigns, labels will be able to regain a unique value add similar to that of CD distribution prior to the digital revolution.

When major labels promote artists, the marketing efforts executed are very similar tasks to that of indie artists: post on social, run some paid ads and do a PR push. And yes, I know that a label can much more easily get a feature in Complex Magazine, but what does that mean in 2018?

The answer is increasingly not much. Consumer attention has shifted from print to web to social resulting in music publishers losing their power of being able to reach large audiences. Consumers don’t discover their new favorite rappers on HotNewHipHop but rather on Instagram.

The pre-digital, PR driven promotional model, while it can be effective, is unmeasurable, not affordably scalable, and can’t produce defensible metrics. Because labels aren’t able to tie back the efforts of a PR campaign to number of streams, ticket or merch sales, identify and optimizing best marketing practices is not possible. The need for making data driven marketing decisions is evident by the shift from chief marketing officers to chief growth officers.

Jeff Bezos knows the lifetime value of a customer, but Jay-Z does not (Danny Quick). And because of a lack of data, spending big dollars on new marketing tactics doesn’t make sense, hence the slow adoption to new practices. The cost per acquisition for streaming through paid social will never equate to the revenue generated for a stream — therefore, paid social for the most part doesn’t make sense. What we’re left with is an industry that revolves around digital marketing but without a defined strategy — rather one-off attempts.

The answer is in owning attention (a data-driven conclusion) by purchasing underpriced social assets. As an example, let’s compare industry leading XXL Magazine’s social presence vs. meme account @RapStuff.

But before we start, let’s define a meme account:

a social media account focused that produces content focused on a specific niche

The account, @RapStuff produces on average ten times the amount of views per video than XXL.

a mere 12,448 views for XXL
Just under 180,000 views for @rapstuff

The counterpoint to that would be that XXL is primarily a website and most of their viewership is on the web. Accordingly to similarweb.com, XXLmag.com produces 16 million monthly views, four million less than @RapStuff. The difference is that these 16 million viewers are the results produced by a 20+ person business and their early 2000’s digital approach. @Rapstuff on the other hand is probably managed by a college student.

Monthly viewers for XXL

TrapNation, a YouTube channel created by 22 year old Andre Benz, is an example of the power of owning attention. Through the channel, he built a record label and is backed by his 25 million YouTube subscribers, or 277 times the combined total amount of subscribers of Capitol Records (8,000), Columbia Records (11,000), Island Records (1,500), 300 Entertainment (22,000), Epic Records (3,500) and RCA Records (39,000). When TrapNation signs a new artist, they’re able to immediately able to promote artist with significantly less effort and capital in comparison to a major because of their existing machine.

With the amount of exclusive content and relationships that labels possess, they should dominate YouTube as well as one social platform. Invest in building the foundation that creates the ability to properly test market reception without added costs. One might argue that the gap on YouTube doesn’t make it economically advantageous for record labels to focus on YouTube due to the lack of advertisement revenue. In focusing on the longterm picture, building a strong channel that keeps fans happy by creating exclusive content will lead to more authentic fan to artists connection and eventually lead to the key performance indicators that matter.

The first step to building this machine is in purchasing the social media assets that are severely underpriced due to their inefficient business model. Let me explain.

The current business model with the meme social account ecosystem is driven by timed advertisements. As an example, on January 14 at 12:00 PM, the account @musicallywar (eight million followers) had eight timed advertisements posted.

These posts, which are deleted within a day are created to cross-promote different meme accounts as well as brands looking for direct response advertising. The posts are deleted because of the pricing model, potentially scaring new followers away, lack of relevance, and a potential Instagram ban.

A close up of one of these advertisements.

I hope I don’t need to explain why serving an investing advertisement on an account that is geared to 12–16 year old doesn’t make sense.

This is clearly inefficient, so why does it occur? Lack of organization and more importantly short term ecosystem mentality. Because many of these accounts are being run by individuals, many of them young and without form business education, the focus is on how to drive short term gains at the users expense rather than building legitimate businesses.

Social Chain, built by Dominican McGregor and Steven Bartlett is the best example of building a real business leveraging these accounts. In bringing these account owners together and creating a mini social conglomerate, they’re doing things the right way and it’s evident in the companies growth.

Anyways, back to the topic.

The breakdown.

Fast forward to 4:00 PM the same day and three of the seven advertisements have been deleted.

By noon the next day, all of the original advertisements are deleted and seven new advertisements appears. This process repeats and repeats.

The misalignment in incentives of the account owners and users results in missed economic opportunities and poor user experience.

Instead of serving users, the account owners are serving advertisers and selling users.The typical cost of the advertisement ranges by the account follower size and amount of time posted. In conversation with the owner of famous meme accounts, I was quoted between $70 to $260 for a post on accounts with up to three million followers.

This is an inefficient business model for everybody. Let’s do some math.

In my investigation, I concluded that @musicallywar, with its eight million followers is bringing in on average $200 a day or $73,000 in yearly revenue. These accounts are regularly sold within the community as well on marketplaces for six months to three years of the revenue they produce in a year.

According to AdEspresso, the cost per like in the US for Instagram advertising is $.20. @musicallywar on Instagram on average produces 120,000 likes per post. At two posts per day, you’re looking at $87.6 million likes or $17.5 million in value.

Here’s where it gets exciting. The $17.5 million in value has the potential to be realized when the content becomes the advertisement. If a record label purchased the asset, all of the content would be “advertisements” in that it would be promoting their own artists. In owning attention and remove the current advertisement model, incentives are realigned with consumers best interests.

The cost to own and maintain several of these accounts would be less than the current cost to break a major label artist of $0.5 — $2.0 Million (IFPI). The cost to purchase @musicallywar is between $36,000 — $220,000.

ThaLightsGlobal, a digital marketing agency and indie record label, is deploying this strategy on a small scale. They’re working with these social themed account owners to build Lil Pumps brand. For example, @rap on Instagram, Lil Pump was featured four times on December 10, 2017 — December 11, 2017. At first, this looks just like a coincidence but considering that between Dec 12 and January 14th, Pump was only featured 9 times out of 291 posts or 3% of all posts, it’s obvious that this was an advertising campaign between ThaLights and @rap.

@Raps, 24 hour Lil Pump campaign.

In this scenario, these “advertisements” were served a positive experience for the community because of their relevance. This process, which is similarly being executed by labels on Spotify, has the potential to be fully realized on social.

When new artist signs with a record label, that artist should go through record labels in-house media funnel. These accounts should act as a complement to the streaming efforts. Focus on building a media company machine, own attention, and further build an edge.

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